Wary Australian consumers dampen July retail sales, point to cautious Q3

* July retail sales unchanged vs +0.3 pct consensus - ABS
* Home prices fall for an 11th straight month in Aug -
CoreLogic
* Q2 business inventory likely a small drag on economic
growth
* Q2 company earnings robust, wage bill expands
* Data due Wed to show Q2 GDP growth of 0.7 pct- Reuters
poll
By Swati Pandey and Wayne Cole
SYDNEY, Sept 3 (Reuters) - Australian retail sales fizzled
out in July while nationwide home prices fell again in August
and a measure of job advertisement eased, suggesting a further
dent in consumer confidence and spending.
Monday's figures from the Australian Bureau of Statistics
(ABS) showed retail sales for July were flat, the weakest result
since March. That lagged expectations of 0.3 percent growth and
followed a respectable 0.4 percent rise in June.
Clothing and footwear led declines with a 2 percent fall
while sales at department stores eased 1.9 percent and household
goods retailing faltered 1.2 percent. The drops were offset by
gains in food, cafes and restaurants - a category that has
remained resilient over the past year or so.
The downbeat data briefly weighed on the Australian dollar
which slipped to $0.7166, the lowest since early 2017.
The currency was last at $0.7177, off 0.2 percent.
The disappointing sales come as economists worry about the
impact on household consumption from snail-paced wage growth and
a slowdown in Australia's once-booming housing market.
Worryingly, data out earlier in the day showed Australian
job advertisements eased in August and were no longer pointing
to a further decline in the unemployment rate.
Separate figures showed home prices fell for the 11th
straight month in August as banks tighten lending standards amid
damaging revelations of some of their business practices.
Lending growth is at its weakest in more than 4 years while
measures of consumer confidence have remained subdued for more
than a year now.
All of this means the Reserve Bank of Australia (RBA) will
stay on its steady policy path as it awaits a pick-up in
inflation and economic growth. The central bank is all but
certain to keep rates at a record low 1.50 percent at its
monthly policy meeting on Tuesday.
"Ongoing home price falls in Sydney and Melbourne will
depress consumer spending as the wealth effect is now going in
reverse," said AMP Chief Economist Shane Oliver.
"It's consistent with our view that the RBA will leave rates
on hold out to late 2020 at least."
UPSIDE RISK TO GDP
Separate data from the ABS on company earnings showed gross
operating profits rose 2.0 percent in the June quarter, the
third straight quarter of solid gains that left profits up more
than 11 percent on a year earlier.
There was also some better news on household incomes.
Firms paid out A$137 billion ($98.3 billion) in wages and
salaries in the June quarter, up 1.2 percent on the previous
quarter. The wage bill rose 4.5 percent annually, more than
double individual pay growth as employers take on more workers.
The report also showed inventories likely subtracted a bare
0.1 percentage point from economic growth in the second quarter.
"That was a slightly smaller drag than we anticipated," said
Westpac senior economist Andrew Hanlan. "Overall, surprises in
the business survey were to the high side. This suggests risks
to our Q2 GDP growth forecast of 0.6 percent are tilted to the
upside."
Australia's GDP data is due Wednesday and a Reuters poll of
16 economists show the A$1.8 trillion economy likely expanded at
0.7 percent last quarter, slower than the brisk pace of 1.0
percent in the three-month ended March.
($1 = 1.3931 Australian dollars)
(Reporting by Swati Pandey;
Editing by Shri Navaratnam)
First Published: 2018-09-03 04:17:13
Updated 2018-09-03 05:33:24

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